Home Business News London's FTSE 100 drops below 5,000 mark

London's FTSE 100 drops below 5,000 mark

by LLB Editor
23rd Sep 11 2:25 pm

London’s share index dropped below the 5,000 mark as shell-shocked investors counted the cost of a turbulent week in the City.

After posting slight gains in early trading, the FTSE 100 Index fell by more than one per cent and dropped into the red, adding to fears of a new global recession.

Thursday was a particularly sobering day for investors in Britain’s top 100 businesses, with £64bn wiped off the companies values. Weak eurozone and Chinese economic data, the sovereign debt crisis and a gloomy forecast from America’s central bank compiled to heap misery on the markets.

The FTSE 100 has not closed below the psychologically important 5,000 mark since July last year, although it dipped below this point during trading last month only to recover before the end of the day.

Copper prices fell by almost six per cent to $329 a pound, while Brent crude in London was down to $103.93 a barrel, a drop of 1.4 per cent. Falling prices and fears over shrinking demand hit the mining sector, with Vedanta Resources, Xstrata and Kazakhmys all losing over seven per cent of their value.

The banking sector also sustained losses after ratings agency Moody’s downgraded eight Greek banks because of their exposure to the country’s deteriorating economy and debt.

Barclays dropped more than one per cent, Lloyds Banking Group fell by 1.5 per cent and Royal Bank of Scotland lost around two per cent of its value.

London-based companies such as Marks & Spencer and BP are also listed on the FTSE 100, which closed down by 4.7 per cent on Thursday, the largest fall since March 2009. Other major world markets also had bad days, with Hong Kong’s Hang Seng falling back 1.9 per cent and Wall Street’s Dow Jones Industrial Average dropping 3.5 per cent.

A political consensus to do what is needed to fix the balance sheets was called for by prime minister David Cameron as the world’s richest countries were close to “staring down the barrel”. Cameron and five other G20 leaders called for decisive action to lift the global economy away from recession.

World Bank president Robert Zoellick said the global economy is in a “danger zone”. Hopes of the Federal Reserve embarking on a third package of quantitative easing had caused the global markets to surge earlier in the week, but moves to keep US interest rates lower for longer disappointed the worldwide markets.

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